Not too sure tax code is correct & that tax should be paid.

Nine_Lives

Was advised by the boys & girls of MSE to wait on the coding from the tax orrifice, which came through this morning. I'm not sure whether the coding issued for my mother is correct & that she should be paying tax on the pension she's receiving from my dads pension.

She's been a non-tax-payer for some time, but last Sept my dad died & as a result, the payments my mum received put her well over the tax free allowance. This is a one off & for the tax year 2012-2013 she should once again earn under the tax free allowance (i THINK). I'm not sure whether only one or both of her benefits eats in to her tax free allowance. I can't remember what i read.

Her earnings/income will be as follows (am going through old bank statements for the figures)...

* Incapacity Benefit - £199.70 paid each fortnight.
* My dads pension - £297.56 paid monthly
* Disability Living Allowance - £283.80 paid monthly.

If her income now puts her over the allowable limit then there's nothing she can do about that, obviously.

Would the tax coding in this case be correct though? BR? Mine is 753L, but then i work.

Just wanting to check everything is A-ok - that she should/should not be paying tax on the pension & that the tax coding is correct.

If something doesn't sound right, then how does she go about putting it right?


I know that not paying tax can put some people on their high horse. Please don't get on yours. Nobody is looking to dodge tax here - just wanting to check whether this is correct or not.

TIA.

Nine_Lives

If i've understood things right, then she will have to pay tax as she will be £657.92 OVER the tax free allowance.

If that bit is correct, question then is - is "BR" the correct coding?

BoGoF

Basically the code is wrong, for 2012-13 the tax free allowance will be £8105.

DLA is non taxable so can be disregarded.

IB can be taxable - when did she first start to receive this.

Can you confirm that "dad's pension" is the one that the code is to be operated against.

Does your mum recall receiving a P161 form to complete from HMRC?

Nine_Lives

BoGoF wrote: »

Basically the code is wrong, for 2012-13 the tax free allowance will be £8105.

if my maths is correct, then she'll be over this figure by the amount i gave in post #2.
How would she go about changing the tax code?

IB can be taxable - when did she first start to receive this.

Some years ago. If you need something more specific than that i can ask her. Just let me know.

Can you confirm that "dad's pension" is the one that the code is to be operated against.

I can. The letter which i scanned & linked to in post #1 says that she'll pay 20% tax on that pension.

Does your mum recall receiving a P161 form to complete from HMRC?

I'll ask & come back

Nine_Lives

BoGoF wrote: »

Does your mum recall receiving a P161 form to complete from HMRC?

Have just looked that form up & asked her.

She says yes & that she posted it off about 2-3 weeks ago.

BoGoF

As I said the DLA is non taxable so even if the IB is taxable she will still be comfortably below the tax free allowance.

Normally HMRC would adjust the code once the completed P161 has been received. It may be that they have just been notified of the pension and the P161 is on it's way but I would phone them anyhow. As things stand 20% will be deducted from all of dads pension.

I assume BR code is also being operated for the current tax year as well, if so a refund will be due.

BoGoF

K_P83 wrote: »

Have just looked that form up & asked her.

She says yes & that she posted it off about 2-3 weeks ago.

Our posts crossed - hopefully will sort itself out but if new code not received by end of month I would chase it up.

Nine_Lives

Thanks for your help.

Although i can't see how she'll be comfortably under the limit. Here's my workings out...

Allowable limit = £8105.

Dads pension = £297.56 (per month) * 12 (months) = £3570.72 per year
Incapacity benefit = £199.70 (per fortnight) * 26 (weeks) = £5192.20
DLA = non taxable.

£3570.72 + £5192.20 = £8762.92 ..... £657.92 over the allowable limit.

Or have i worked things out wrong?

BoGoF

K_P83 wrote: »

Thanks for your help.

Although i can't see how she'll be comfortably under the limit. Here's my workings out...

Allowable limit = £8105.

Dads pension = £297.56 (per month) * 12 (months) = £3570.72 per year
Incapacity benefit = £199.70 (per fortnight) * 26 (weeks) = £5192.20
DLA = non taxable.

£3570.72 + £5192.20 = £8762.92 ..... £657.92 over the allowable limit.

Or have i worked things out wrong?

No you are correct......my apologies I read the IB as monthly. If the IB is taxable then her code should show personal allowance of £8105 minus the IB of £5192 (or whatever the rate is for next year) leaving £2913 of allowances left over meaning a tax code of 291L.

I take it mum is under 65?

Nine_Lives

BoGoF wrote: »

No you are correct......my apologies I read the IB as monthly. If the IB is taxable then her code should show personal allowance of £8105 minus the IB of £5192 (or whatever the rate is for next year) leaving £2913 of allowances left over meaning a tax code of 291L.

That just bamboozled the hell out of me :rotfl: but i'll pass on the information & tell her to call up if there's no letter received by the end of the month with a tax code change & hope that they'll then sort it from that

I take it mum is under 65?

Aye, she's 49.

xylophone

http://www.dwp.gov.uk/docs/benefitrates2012.pdf

From April 2012 your mother will receive long term Incapacity Benefit (£99.15 per week)+age increase at the lower rate (£5.90 per week) so £210.10 per fortnight (£5462.60 per annum)?

She will also receive £297.56 per month widow's pension. (£3570.72 per annum). Or does this too increase in April?

From April the personal allowance for an under 65 will be £8105.

I take it that like the state pension, the IB is not taxed at source? If so, any tax due will be taken from the widow's pension (appropriately coded).

In short, your mother needs to advise HMRC of her full financial circumstances for 2012-13 so that the appropriate code can be applied?